Despite thundering rhetoric from President Barack Obama about the “shameful” and “outrageous” size of Wall Street bonuses, the White House has largely backed down from imposing tough restrictions on pay in the financial industry.

New York’s Attorney-General, Andrew Cuomo, recently reported that America’s nine biggest banks handed out $32.6bn in bonuses last year despite running up aggregate losses of $81bn. But after early threats to cap pay at $500,000 at banks in receipt of state aid, the U.S. Treasury Secretary, Timothy Geithner, has been an influential voice in the administration urging a more laissez-faire approach.

Senior bankers have lobbied hard to keep their golden pay cheques, arguing that restrictions would put the U.S. at risk of a flight of talent to financial centres in Europe or elsewhere in the world. Giving evidence to lawmakers on Capitol Hill in February, Morgan Stanley’s chief executive, John Mack, said the mere threat of curbs for U.S. firms had already led to European banks poaching his mid-level investment bankers: “Some of the European banks have already gone out and put packages and multi-year guarantees in front of them.” His counterpart at Bank of America, Ken Lewis, said: “It is okay to do the things that are being talked about at the very top, but if you start to go too low in the organisation, you will run off key talent.”

A few modest measures are under way. The Obama administration is supporting a bill in Congress which will introduce British-style “say on pay” votes at annual meetings, giving shareholders a chance to approve or disapprove of boardroom remuneration arrangements. — © Guardian Newspapers Limited, 2009

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